2011 401k and Traditional and Roth IRA Limits

by RC on November 15, 2010

Several weeks ago, the IRS released pension plan limits for 2011, which sets the limits one can contribute to a 401(k), 403(b), and other retirement savings plans, as well as individual retirement account (IRA) limitations for traditional and Roth IRAs.

2011 401k limits

The maximum contribution limit for a 401k, 403(b), 457(b), or Government Thrift Savings Plan is remaining the same in 2011 at $16,500. If you are 50 years old or older, you can contribute an additional $5,500 in 2011.

Traditional and Roth IRA s

With a traditional IRA contributions are tax deductible and the withdrawals made from a traditional IRA during retirement are taxable. For a Roth IRA contributions are made with after tax money, and the proceeds can be withdrawn tax free after reaching age 59 1/2. Due to the ever present talk of tax rates increasing in the future, many people find the Roth IRA more attractive, particularly if they are already contributing to a tax-deferred plan such as a 401k or a 403b.

Income Phase outs based on Adjusted Gross Income (AGI) for 2011 Traditional and Roth IRAs

  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in  an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $56,000 and $66,000, unchanged from 2010. For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $90,000 to $110,000, up from $89,000 to $109,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $169,000 and $179,000, up from $167,000 and $177,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $169,000 to 179,000 for married couples filing jointly, up from $167,000 to $177,000 in 2010. For singles and heads of household, the income phase-out range is $107,000 to $122,000, up from $105,000 to $120,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.

2011 Traditional and Roth IRA limits

The maximum contribution limit for a Traditional IRA or a Roth IRA is not changing for 2011 either, so the max. contribution will remain $5,000. The  IRA contribution limits are supposed to be increased in increments of $500 based on inflation, and should go up regularly, but apparently inflation did not rise enough according to the government’s estimate, to reach the $500 increment. If you are 50 years old or older, you can contribute an additional $1,000 in 2011, for a total of $6,000. Note that you can contribute to both a Traditional IRA or a Roth IRA in the same year, but the total for both cannot exceed the $5,000 maximum contribution limit ($6,000 for 50 yrs old and older).

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